PRIME MINE O JEWELS PRIVATE LTD,MUMBAI vs. ITO WARD 5(2)(1), MUMBAI, MUMBAI

Briefly stated, the assessee is a private limited company which filed its return of income for the assessment year 2019-20 declaring total income of Rs. 3,29,500/-. The case was selected for scrutiny pursuant to the Risk Management Strategy formulated by the Board. During the course of assessment proceedings, information available with the Department, including information uploaded on the Insight Portal by the Investigation Wing, indicated that the assessee had allegedly entered into high-value transactions involving bogus purchases, bogus sales and accommodation entries of unsecured loans during the relevant financial year. The transactions under consideration aggregated to Rs. 10,65,63,676/- and were stated to have been routed through various entities allegedly linked to accommodation entry operators. On the basis of the information received and the material gathered during search and seizure proceedings conducted in the cases of certain entry operators and intermediaries, the Assessing Officer formed the view that the transactions represented unexplained expenditure and, accordingly, treated the amount of Rs. 10,65,63,676/- as income of the assessee under section 69C read with section 115BBE of the Act. The assessment was completed under section 143(3) read with section 147 of the Act.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). During the appellate proceedings, notices under section 250 of the Act were issued on 09.10.2025, 22.10.2025 and 12.11.2025, fixing the respective dates of compliance on 16.10.2025, 31.10.2025 and 19.11.2025. The learned CIT(A), in the impugned order, has recorded that the notices were duly communicated to the assessee and that no written submissions or response were filed by the assessee in compliance with the notices. The learned CIT(A), therefore, proceeded to dispose of the appeal and upheld the addition made by the Assessing Officer.

Before us, the learned counsel for the assessee submitted that the appeal requires to be restored to the file of the learned CIT(A), as the assessee could not effectively present its case before the first appellate authority and, consequently, the issues arising in the appeal have not been considered after taking into account the assessee's explanation and supporting evidence. It was submitted that the addition involves substantial factual issues relating to the nature and genuineness of the transactions, the identity of the parties, the supporting invoices and other documents, and the material relied upon by the Assessing Officer. It was accordingly prayed that, in the interest of substantial justice, the assessee may be afforded one effective opportunity to present its case before the learned CIT(A) and that the matter may be restored to the file of the learned CIT(A) for adjudication afresh in accordance with law.

The learned Departmental Representative (“the learned DR”) on the other hand, relied upon the orders of the lower authorities. It was submitted that the learned CIT(A) had not denied an opportunity to the assessee and, in fact, had issued notices under on three occasions. It was accordingly contended that the impugned order had been passed after granting sufficient opportunities and that there was no justification for restoring the matter to the file of the learned CIT(A).

We have considered the rival submissions and perused the material available on record. It is true that the learned CIT(A) had issued notices on three occasions and, therefore, it cannot be said that no opportunity whatsoever was afforded to the assessee. The impugned order itself records that notices under were issued on 09.10.2025, 22.10.2025 and 12.11.2025, with separate dates fixed for compliance, and that no submissions were filed by the assessee. Thus, the learned CIT(A) cannot be faulted merely on the ground that no notice or opportunity was granted.

At the same time, the appellate proceedings before the CIT(A) constitute an important stage in the adjudication of the rights of an assessee. The first appellate authority is required to examine the grounds raised before it and adjudicate the issues arising from the assessment order after considering the material relevant to the controversy. The principle of natural justice requires not merely the issuance of a notice but also an effective opportunity to the concerned party to place its case, particularly where the dispute involves substantial factual issues and the determination of the issue may have significant civil and financial consequences. While the assessee cannot claim an indefinite number of opportunities as a matter of right, the appellate authority, while exercising its jurisdiction, is also required to ensure that the dispute is adjudicated on its merits after giving the assessee a reasonable and effective opportunity to place the relevant material on record.

In the present case, the addition of Rs. 10,65,63,676/- under section 69C read with section 115BBE of the Act arises from an allegation that the assessee was a beneficiary of accommodation entries and that the underlying transactions represented unexplained expenditure. The material placed before us indicates that the Assessing Officer relied upon information emanating from investigation proceedings and upon various documents and electronic evidence gathered during search and seizure proceedings. The assessee had, during the assessment proceedings, submitted certain confirmations, invoices, bank statements and ledger accounts, although the Assessing Officer found the same to be insufficient and inconsistent with the investigation material. The dispute, therefore, involves examination of the factual and evidentiary aspects of the transactions and the explanation of the assessee.

In these circumstances, and having regard to the nature of the addition involved, we are of the considered view that the ends of justice would be met if the assessee is afforded one effective opportunity to present its case before the learned CIT(A). We are conscious of the fact that the learned CIT(A) had issued three notices and that the assessee had not responded to those notices. Therefore, we do not hold that the impugned order was passed in complete violation of the principles of natural justice. Nevertheless, the principle of natural justice is required to be applied in a meaningful manner and the ultimate objective of appellate proceedings is to arrive at a correct determination of the controversy on the basis of the material available on record. In the peculiar facts of the present case, we consider it appropriate, in the interest of substantial justice, to provide the assessee one final opportunity to substantiate its claim and to place all relevant documentary evidence and submissions before the learned CIT(A).

Accordingly, the impugned order passed by the learned CIT(A) is set aside and the matter is restored to the file of the learned CIT(A) for de novo adjudication. The learned CIT(A) shall afford the assessee a reasonable and effective opportunity of being heard and permit the assessee to furnish such documents, explanations and evidences as may be relevant to the issues arising in the appeal. Thereafter, the learned CIT(A) shall examine the material furnished by the assessee, consider the material already available on record and pass a fresh speaking and reasoned order in accordance with law. Needless to say, the learned CIT(A) shall adjudicate the appeal independently and in accordance with the provisions of the Act, without being influenced by any observations made by us in the present order.

We make it clear that we have not expressed any opinion on the merits of the addition made by the Assessing Officer under section 69C read with section 115BBE of the Act. All issues arising in the appeal, including the nature and genuineness of the transactions, the evidentiary material relied upon by the Assessing Officer and the explanation and supporting evidence that may be furnished by the assessee, are left open for consideration by the learned CIT(A) in the course of the fresh appellate proceedings. The assessee shall extend full cooperation and shall not seek unnecessary adjournments or delay the proceedings. The learned CIT(A) shall thereafter dispose of the appeal expeditiously and in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes.